It’s that crazy time of year when
time is short, but I cannot resist a couple of quick posts about the pending
Obamacare health exchange lawsuit, which should be decided within the next week
or so by a district court in Washington D.C.(Judge Paul Friedman), and followed
by several similar decisions in suits pending in Virginia, Oklahoma and Indiana. The case is incredibly important—if the
challengers win, consumers on more than half of the Obamacare health insurance
exchanges will receive no tax subsidies to help cover the cost of insurance, an
outcome that will devastate the operation of the Act. The case, in my view, is
also incredibly weak. And perhaps most
significantly for law professors, the case shows us just how much lawyers and
courts have to learn about the legislative process. This post will offer some “Congress 101,” and
explain how an understanding of the ACA’s legislative process should have put
this case to bed long ago. In my next
post on this subject, I will tackle some of the other issues in the case,
including some interesting Chevron
arguments.

A quick summary of the case, for
those not up to speed: The health reform statute, the ACA, sets up new
insurance marketplaces (like Expedia for health insurance) and provides
generous subsidies to individuals and families with incomes up to 400% of the
federal poverty level to help them buy insurance in those marketplaces, which
are called insurance exchanges. The statute makes states the default operators
of those exchanges but if a state chooses not to operate one or fails to, the
federal government steps in. As most readers
know, more than half of the states have decided not to operate their own
exchanges, and so the federal government is doing so (how it’s doing in that
regard is another important story, but one not relevant here).

What is relevant here is
that the ACA is a very badly drafted statute.
And it’s badly drafted for a simple reason that turns out to be important
to understanding how the pending litigation should be resolved: Because Senator Ted Kennedy died in the
middle of the legislative process and was replaced by Republican Scott Brown,
the statute never went through the usual legislative process, including the
usual legislative clean-up process. Instead, because the Democrats lost their
60th filibuster-preventing vote, the version that had passed the
Senate before Brown took office, which everyone initially had thought would be
a mere first salvo, had to effectively serve as the final version, unchangeable
by the House, because nothing else could get through the Senate. In the end, the statute was synthesized across
both chambers by an alternative process, called “reconciliation,” which allows
for only limited changes but avoids a filibuster under Congress’s rules. Keep this in mind and read on….

So, the statute is sloppy. It has three section 1563s, for example, as
Tim Jost has pointed out. The section at
issue in this case, the one introducing the tax subsidies, is another example
of the sloppiness. It states that the subsidies
shall be available to individuals enrolled in insurance “through an Exchange
established by the State under section 1311” of the Act (emphasis added). The challengers
argue that this text clearly excludes individuals enrolled through federally-operated
exchanges from receiving the subsidies.
Section 1321 of the Act, however, further discusses the state exchanges
and sets forth the process
for the federal government to step in when the states fail to operate them. In
such case, the Act provides, HHS shall “establish and operate such
Exchange within the State” (emphasis added). The Government points to this and other
language to argue that when the federal government operates a state exchange it
stands in shoes of the state exchange and is “such an exchange” for purposes of
the Act. At a minimum , the Government argues, the statute is more than sufficiently
ambiguous to trigger agency deference.

There are other provisions that bear
on the issue, most importantly 26 U.S.C. 36B(f)(3), which requires the
exchanges to provide information about the tax subsidies for each consumer both
to the consumer and to the federal government.
That section directs its reporting requirements to both “[e]ach Exchange … under section 1311(f)(3) [the state exchanges]
or 1321c [the federal exchanges].” In other words, 36B(f)(3)assumes that the
federal exchanges will also be reporting information about tax subsidies—a
requirement that is arguably nonsensical if consumers on federal exchanges are
not eligible for those subsidies.

My view is that whatever you
believe about the merits of these respective textual arguments, a basic
understanding of the ACA’s legislative process makes clear that Congress intended
for the subsidies to be available on the federal exchanges. I think the statute is sloppy, but I think
its meaning is plain—and not because I am relying on fuzzy notions of statutory
purpose. Rather, there are formalist, structural features of the legislative
process that make this case an easy one.
(For more about the unforgivable
ignorance of lawyers and courts about how Congress works, see my two articles, Statutory Interpretation from the Inside—An Empirical Study of Congressional Drafting, Delegation and the Canons: I
65 Stan. L. Rev. 901,
and PartII, 66 Stan. L. Rev. (forthcoming 2014) (both with Lisa Bressman)).

1.Why
Understanding the ACA’s Use of Reconciliation Should End This Litigation

Mostly absent from the briefing for
either side in the case is the fact that the section in the bill that most
clearly provides for both state and federal exchange subsidies—the information
reporting requirement in section 36B(f)(3), quoted above—was added during the Reconciliationprocess. The other sections in dispute were added in
the earlier, Ted Kennedy, Senate draft. In contrast, 36B(f)(3) came in months later. That
subsection makes clear the assumption that the subsidies would be available on
the federally-operated exchanges as well as on the state exchanges. Let me explain now why the fact that
36B(f)(3) came in through Reconciliation should be the ballgame.

As noted, the Reconciliation
process was the House-Senate bill-synthesizing process that was used in the ACA
instead of the usual Conference Committee process. Everyone who follows Congress knows that the
Conference stage is the most important
stage of the legislative process. Even the courts, which are generally ignorant
about the legislative process,
acknowledge this fact about the importance of Conference. It’s the key stage for two reasons. First, it’s where the critical compromises
get worked out across the two chambers.
And second, it is the last stage
of the process. In the case of the ACA, Reconciliation took the place of
Conference, and Reconciliation was particularly important because the two chambers
did not have their usual back and forth during the ordinary legislative process
(again, because everyone was stuck with Kennedy version of the Senate-passed
bill). Reconciliation was the only way, in the ACA story, that the two chambers
reached a final agreement. It was the
critical moment, and the provisions added then are where the courts should
focus their attention, and where any ambiguities should be resolved.

The counterargument, of course,
and one the challengers make, is that Congress could have done more to clarify
its intentions during that Reconciliation process. Sure, that would have done everyone a big
favor. But even assuming that the
special rules of Reconciliation (which only allow certain budget-related
changes) would have permitted such clarifying changes, that kind of negative
inference makes little real-world sense –not only because of the exceedingly messy context
of the ACA’s drafting but, more importantly, because there is zero evidence that anyone thought there was
anything to clarify. Because both chambers were certain that the subsidies
applied to the federal exchanges, there was no reason to focus the chambers’
final-stage political efforts on uncontroversial provisions.

And it is implausible that there
was any doubt on the part of House that the federal exchanges would receive the
subsidies. Recall that the House wanted all of the exchanges federally run and
only acceded to the Senate, state-led, default version because of the Ted
Kennedy situation. Given the House’s reluctance to make that compromise in the
first place, it is unthinkable that the House would have silently—without any
commentary in media, on the floor, or in proposed reconciliation amendments—accepted
a compromise that so greatly disadvantaged the federal exchanges that were its
priority all along. It is of no small
moment that the Reconciliation bill originated in the House, and is where the
House got to put its imprint on the legislation. The language about the federal and state
exchanges added as part of that bill cannot be read as anything other than as
confirming the common understanding that
the subsidies would be available on both types of exchanges.

2. The CBO Canon: Construe Statutory Ambiguities Consistent
with the Assumptions of the Budget Score

When these cases were first proposed
last year, I posted here on this blog an argument that Congress’s intent to give subsidies to the federal exchanges
was evident from the simple fact that the budgetary estimate for the ACA—which
was a central part of the legislative process—assumed that those subsidies would
be available. More generally, I proposed
a new “CBO Canon” of statutory interpretation: a default interpretive
presumption that ambiguous statutes should be construed consistent with the
assumptions underlying the Congressional Budget Office’s estimate of the financial
impact of the legislation. This proposed rule is especially relevant for statutes
like the ACA, for which the President set a budgetary goal and news outlets
repeatedly reported that the statute was tweaked over and over again to get the
numbers just right.

No Supreme Court case has ever
utilized the CBO score in this manner, but all of the Supreme Court’s statutory
cases claim to be about effectuating the legislative bargain. The challengers
in this case also have claimed that the purported omission of the subsidies for
the federal exchanges was intentional—that
is, they are not trying to take an advantage of something they claim to be a mere drafting
error. My recent empirical work with Lisa Bressman strongly
suggests that congressional drafters rely on the budget score enormously in
making their deals—indeed, much more so than they rely on the judicial rules of
statutory interpretation and often even more than they rely on close readings
of the statutory text itself. In other
words, if the idea really is to effectuate the congressional deal, as the
challengers claim, the courts should construe statutory ambiguities in a way
consistent with the assumptions made by CBO during the drafting process.

The government and amici have picked up the CBO argument in
this case, including providing a letter to Congress from CBO director Douglas
Elmendorf testifying to CBO’s initial and ongoing understanding that the subsidies
would not be for the state exchanges alone. Opponents have offered nothing as a
counterargument except for the fact that CBO’s initial calculation assumed, as
did most others policymakers, that most of the exchanges would be state
operated (because that is what the federalists now opposing the ACA wanted!).But that does not change the fact that
the CBO did not understand the subsidies to be only for the state exchanges. And we have more evidence that Congress, the
President, and the public all knew, followed and relied on the CBO estimate
throughout the ACA drafting process than we have that any of those players were
focused on the kind of hyper-technical textual arguments—made in the context of
a 2,000 page statute—on which the challengers hinge this case.

3.The Legislative
History is Irrelevant

The challengers also make a legislative-history
based argument that likewise falls by the wayside once one understands the
ACA’s legislative process. They cite a
stray remark by Senator Baucus in September 2009 explaining that the Finance Committee
had jurisdiction over the bill (in addition to the Health, Education, Labor and
Pensions Committee) because subsidies operate as tax credits. As an initial matter, the Baucus comment had
nothing to do with differentiating between the state and federal exchanges—it was
an explanation of why the Committee had jurisdiction over amendments relating
to health insurance coverage even as it would not have jurisdiction over
medical malpractice amendments. But even if it were relevant, it tells us
nothing about whether the subsidies might be offered on one, the other, or both.
(Read the transcript for yourself.) More
importantly, it is simply not true, as the challengers claim, that also
including subsidies for the federal exchanges would somehow have deprived the
Finance Committee of jurisdiction over the ACA. There is zero evidence for any
such argument in the record or in the rules of the Senate.

Of greater general importance, a stray
comment early in the drafting process of a statute with a legislative process
as unorthodox as the ACA’s has no place in the judicial decision-making
process. Our recent empirical work suggests
that congressional insiders would agree.
Legislative history has an important place in the statute-making process
when the legislative history represents a consensus, is the product of
deliberation, and is tied to the text of the ultimate legislation. It has less relevance and is less reliable
when the statute goes through a process so unpredictable that even its sponsors
could not have charted its ultimate path.
(The challengers out-of-context use of the Baucus comment is proof
positive of the risk of legislative-history cherry-picking in general, but is
all the more risky in messy statutes like this one.) And this same risk goes
for any other stray comment that either side might find.

There’s a lot
more that could be said about how little we understand the legislative process
and how important it is—both to this litigation and, more generally, to most legal
questions that we now face. Nor have I
attempted to comprehensively chronicle each of the challengers’ more minor
arguments in this kitchen-sink of a case, or to talk about how this case is yet
another illustration of the specially divisive politics of health reform. But I’ll leave it here for now, and return in
a future post with some thoughts about the Chevron
arguments, which are likely to be decisive.